Enanta Pharmaceuticals(ENTA) - 2023 Q1 - Quarterly Report

PART I. UNAUDITED FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, management's discussion of financial condition, market risk disclosures, and controls and procedures Consolidated Financial Statements The company's financial statements for Q4 2022 show decreased assets, a net loss of $29.0 million, and $35.6 million cash used in operations Consolidated Balance Sheets Total assets decreased to $347.5 million by December 31, 2022, driven by reduced cash, while liabilities and equity also declined Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $42,223 | $43,994 | | Total current assets | $283,704 | $311,713 | | Total assets | $347,534 | $375,410 | | Total current liabilities | $23,001 | $29,827 | | Total liabilities | $46,697 | $54,076 | | Total stockholders' equity | $300,837 | $321,334 | Consolidated Statements of Operations Total revenue for Q4 2022 was $23.6 million, with a net loss of $29.0 million, an improvement from the prior year due to lower R&D expenses Quarterly Operating Results (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Royalty revenue | $22,585 | $27,648 | | Total revenue | $23,585 | $27,648 | | Research and development | $40,902 | $48,549 | | General and administrative | $12,696 | $9,508 | | Loss from operations | ($30,013) | ($30,409) | | Net loss | ($28,986) | ($30,115) | | Net loss per share, basic and diluted | ($1.39) | ($1.48) | Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $35.6 million in Q4 2022, resulting in a net decrease in cash of $1.8 million Summary of Cash Flows (in thousands) | Activity | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($35,641) | ($13,271) | | Net cash provided by investing activities | $33,569 | $45,501 | | Net cash provided by financing activities | $301 | $9,632 | | Net (decrease) increase in cash | ($1,771) | $41,862 | Notes to Consolidated Financial Statements (unaudited) Notes detail the company's drug development business, funding from AbbVie royalties, ongoing net losses, and a patent infringement lawsuit against Pfizer - The company's primary business is the discovery and development of small molecule drugs for viral infections, with R&D programs focused on RSV, SARS-CoV-2, HBV, and hMPV. Operations are funded by royalties from its collaboration with AbbVie on the HCV drug MAVYRET/MAVIRET[24] - The company has a collaboration agreement with AbbVie for HCV protease inhibitors, receiving tiered royalties on net sales of MAVYRET/MAVIRET. Total proceeds from the collaboration have reached approximately $1.228 billion through December 31, 2022[45] - In June 2022, Enanta filed a patent infringement lawsuit against Pfizer, Inc., seeking damages for the manufacture, use, and sale of Paxlovid™, alleging it infringes on Enanta's U.S. Patent No. 11,358,953[55] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased royalty revenue, reduced R&D expenses, and the company's cash position, expected to fund operations into Q4 fiscal 2024, alongside pipeline progress Overview Enanta, a biotechnology company, focuses on antiviral drug development, funded by HCV royalties, and expects continued net losses while holding $241.4 million in cash - The company's primary R&D focus is on treatments for respiratory syncytial virus (RSV), SARS-CoV-2 (COVID-19), hepatitis B virus (HBV), and human metapneumovirus (hMPV)[62][65] - The company reported a net loss of $29.0 million for the quarter ended December 31, 2022, and expects to continue incurring net losses for the foreseeable future[63] - As of December 31, 2022, cash, cash equivalents, and marketable securities totaled $241.4 million, which is expected to fund operations into approximately the fourth quarter of fiscal 2024[65] Our Wholly-Owned Programs Enanta is advancing antiviral candidates, including EDP-938 in Phase 2 for RSV, EDP-235 in Phase 2 for COVID-19, and EDP-514 for HBV, with new programs for hMPV/RSV - RSV Program: EDP-938 is in three ongoing Phase 2 studies (RSVPEDs, RSVTx, RSVHR) in high-risk populations. A Phase 1 study of a second compound, EDP-323, was initiated with data expected in Q2 2023[67] - COVID-19 Program: Lead candidate EDP-235 is in a Phase 2 study (SPRINT) with data expected in Q2 2023. A Phase 3 study could initiate in the second half of 2023. A new program targeting the PLpro enzyme was also announced[68][69] - HBV and hMPV Programs: The lead HBV candidate, EDP-514, is a core inhibitor with potential to be best-in-class. A new research program is targeting a dual inhibitor for hMPV and RSV, with a clinical candidate selection expected in Q4 2023[69] Results of Operations Q4 FY2023 total revenue was $23.6 million, down from $27.6 million, primarily due to lower MAVYRET/MAVIRET sales, while R&D expenses decreased and G&A expenses increased Comparison of Operating Results (in thousands) | Item | Q1 FY2023 (ended Dec 31, 2022) | Q1 FY2022 (ended Dec 31, 2021) | | :--- | :--- | :--- | | Royalty revenue | $22,585 | $27,648 | | License revenue | $1,000 | $— | | Research and development | $40,902 | $48,549 | | General and administrative | $12,696 | $9,508 | | Net loss | ($28,986) | ($30,115) | - Royalty revenue decreased by $5.0 million due to lower HCV sales by AbbVie, as patient volumes remain below pre-COVID-19 levels[90] - R&D expenses decreased by $7.6 million, primarily due to a $4.7 million reduction in the non-viral liver disease (NASH) program and a $3.8 million decrease in virology program costs related to clinical trial timing[93] Liquidity and Capital Resources The company held $241.4 million in cash and equivalents as of December 31, 2022, with $35.6 million cash used in operations, sufficient to fund operations into Q4 fiscal 2024 Summary of Cash Flows (in thousands) | Activity | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Cash used in operating activities | ($35,641) | ($13,271) | | Cash provided by investing activities | $33,569 | $45,501 | | Cash provided by financing activities | $301 | $9,632 | - Cash used in operating activities increased by $22.4 million year-over-year, driven by the timing of R&D payments and a federal tax refund of $8.5 million received in the prior-year period[98] - The company believes its existing cash, equivalents, marketable securities, and future royalties will be sufficient to meet cash requirements into approximately Q4 of fiscal 2024[102] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily from interest rate sensitivity on its cash portfolio and foreign exchange risk, both currently considered immaterial - The company's portfolio of cash, cash equivalents, and marketable securities ($241.4 million at Dec 31, 2022) is sensitive to interest rate changes, but a 1% change is not expected to have a material impact[108] - Foreign currency exchange risk, primarily from the British Pound and Euro, was immaterial during the quarter but may increase with the expansion of clinical trials and manufacturing outside the U.S[109] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2022, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[110] - No changes occurred in the company's internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, these controls[111] PART II. OTHER INFORMATION This section addresses risk factors and lists exhibits filed with the Form 10-Q Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022, were reported - There have been no material changes to the risk factors discussed in the 2022 Form 10-K during the quarter ended December 31, 2022[112] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in Inline XBRL format - The exhibits filed with the report include certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and the financial data in Inline XBRL format (Exhibits 101, 104)[114]